Rachel Amy Maurer v. Fremont Insurance Company , 325 Mich. App. 685 ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
DALE MAURER, as Conservator for RACHEL FOR PUBLICATION
AMY MAURER, a Legally Incapacitated September 18, 2018
Individual,
Plaintiff/Counterdefendant-
Appellee,
v No. 336514
Tuscola Circuit Court
FREMONT INSURANCE COMPANY, LC No. 14-028072-NF
Defendant/Counterplaintiff-
Appellant.
Before: JANSEN, P.J., and SERVITTO and SHAPIRO, JJ.
JANSEN, J. (dissenting).
Defendant appeals as of right the trial court’s amended final order closing the case in this
first-party no fault action. However, the crux of defendant’s appeal is actually a challenge to the
trial court’s order granting summary disposition in favor of plaintiff, denying defendant’s motion
to amend its affirmative defenses, and denying defendant’s motion for summary disposition.
Because I would reverse, I respectfully dissent.
I. RELEVANT FACTS AND PROCEDURAL HISTORY
On December 3, 2012, plaintiff, Rachel Amy Maurer, was catastrophically injured in a
motor vehicle accident. At the time of the collision, plaintiff was driving her personal vehicle, a
Buick Century, within the course and scope of her employment with the United States Postal
Service (USPS). Accordingly, plaintiff’s medical expenses were paid pursuant to the Federal
Employee Compensation Act (FECA), 5 USC 8101 et seq. Plaintiff also successfully pursued a
tort action, seeking third-party no-fault benefits pursuant to MCL 500.3135, against the driver of
the vehicle who caused the collision, as well as his employer.
At the time of the accident, plaintiff’s husband, Dale Maurer, had obtained a no-fault
insurance policy through defendant. On January 3, 2014, plaintiff filed a complaint for
declaratory relief against defendant on the basis that because of her third-party action, USPS had
“asserted a lien claiming a right of reimbursement for expenses paid under FECA[.]” Plaintiff
asked the trial court to enter a declaratory judgment order that in the event that she obtained a
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tort recovery, defendant would become liable for first-party PIP benefits to be reimbursable to
USPS under FECA.
On December 5, 2014, after plaintiff succeeded in obtaining a tort recovery, she filed an
amended complaint in which she claimed that USPS had, in fact, asserted a lien for
reimbursement of expenses paid under FECA, and asked the trial court to enter a declaratory
judgment against defendant for PIP benefits, together with costs, interest, and attorney fees.
Plaintiff also added a second breach of contract claim, alleging that despite having reasonable
proof of plaintiff’s loss, defendant unreasonably refuses to pay PIP benefits to her.
On January 5, 2015 defendant filed a counterclaim for rescission of the no-fault insurance
policy issued to Mr. Maurer on the basis that Mr. Maurer had made material misrepresentations
regarding the use of the Buick Century in his application for no-fault insurance on September 6,
2006. Defendant claimed that Mr. Maurer’s material misrepresentations increased its risk of loss
by “impairing its ability to make a reasoned and informed underwriting decision relative to the
policy that was issued.” Accordingly, defendant claimed it was entitled to rescind ab initio the
no-fault policy issued to Mr. Maurer.
On July 20, 2015, plaintiff moved for summary disposition on defendant’s counterclaim
for rescission, arguing that the innocent third-party doctrine protected plaintiff’s right of
recovery, that defendant’s rescission claim was time barred by the six-year statute of limitations,
and that alternatively, the doctrine of laches precluded defendant’s claim. In an opinion and
order dated September 29, 2015, the trial court granted plaintiff’s motion for summary
disposition, concluding that because Mr. Maurer was the one to file the application for insurance,
plaintiff was protected by the innocent third-party rule. Additionally, the trial court determined
that the six-year statute of limitations found in MCL 600.5813 barred defendant’s rescission
claim because the alleged misrepresentation occurred on September 6, 2006, which means that
defendant should have filed its claim before September 6, 2012.
Following this Court’s decision in Bazzi v Sentinel Insurance Company, 315 Mich. App.
763; 891 NW2d 13 (2016) (Bazzi I), defendant was permitted to file a motion for summary
disposition on its rescission claim. Defendant argued that Mr. Maurer had made material
misrepresentations regarding the use of the Buick Century, namely that the vehicle was, in fact,
being used for business purposes, and rescission was appropriate. Additionally, because plaintiff
was injured “in a motor vehicle accident involving a vehicle she owned, but for which she did
not purchase the required no-fault insurance,” coverage was precluded under MCL 500.3113(b).
Finally, defendant argued that the statute of limitations, the doctrine of laches, or the innocent
third-party rule did not bar its claim for rescission. Defendant also filed a motion to amend its
affirmative defenses to include MCL 500.3113(b).
Plaintiff filed her own motion for summary disposition pursuant to MCR 2.116(C)(10).
Plaintiff argued that defendant’s “only justification for refusing [to pay PIP benefits to plaintiff]
is a legal theory that has already been rejected” by the trial court, i.e., rescission. Accordingly,
there is no justifiable reason to refuse to pay plaintiff PIP benefits, and summary disposition in
favor of plaintiff should be granted with respect to plaintiff’s claims for work loss benefits and
the itemized allowable expenses claimed.
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In a written opinion and order entered on October 12, 2016, the trial court granted
plaintiff’s motion for summary disposition, denied defendant’s motion to amend its affirmative
defenses, and denied defendant’s motion for summary disposition. The trial court found that the
six-year statute of limitations found in MCL 600.5813 barred defendant’s rescission claim.
Accordingly, it did not find it necessary to address defendant’s doctrine of laches or innocent
third-party rule arguments. Likewise, the trial court denied defendant’s motion to amend its
affirmative defenses, stating that it had “reviewed the argument, and . . . it is without merit[.]”
Conversely, plaintiff’s motion for summary disposition was granted. The trial court
noted that plaintiff requested entry of a judgment in the amount of $1,434,628.54, and that
because defendant did not dispute the amount of damages, a judgment in that amount would be
entered. This appeal followed.
II. STATUTE OF LIMITATIONS
Defendant first argues that the trial court erroneously denied its motion for summary
disposition on the basis that its claim for rescission was brought outside of the six-year statute of
limitations found in MCL 600.5813. More specifically, defendant argues that because each
renewal of Mr. Maurer’s insurance policy formed a new contract, defendant’s rescission claim
accrued on September 6, 2012, the date upon which the policy in effect at the time of the
underlying accident took effect, and therefore, its rescission claim was timely. I agree.
This Court reviews a trial court’s decision regarding a motion for summary disposition de
novo. Lowrey v LMPS & LMPJ, Inc, 500 Mich. 1, 5-6; 890 NW2d 344 (2016). A motion for
summary disposition brought under MCR 2.116(C)(10) “tests the factual sufficiency of the
complaint,” Shinn v Mich Assigned Claims Facility, 314 Mich. App. 765, 768; 887 NW2d 635
(2016) (citation omitted), and should be granted where “there is no genuine issue regarding any
material fact and the moving party is entitled to judgment as a matter of law.” West v Gen
Motors Corp, 469 Mich. 177, 183; 665 NW2d 468 (2003).
“The moving party has the initial burden to support its claim for summary disposition by
affidavits, depositions, admissions, or other documentary evidence.” McCoig Materials, LLC v
Galui Constr, Inc., 295 Mich. App 684, 693; 818 NW2d 410 (2012). The court must consider all
of the admissible evidence in a light most favorable to the nonmoving party. Liparoto Constr,
Inc v Gen Shale Brick, Inc, 284 Mich. App. 25, 29; 772 NW2d 801 (2009). However, the party
opposing summary disposition under MCR 2.116(C)(10) “may not rely on mere allegations or
denials in pleadings, but must go beyond the pleadings to set forth specific facts showing that a
genuine issue of material fact exists.” Oliver v Smith, 269 Mich. App. 560, 564; 715 NW2d 314
(2006) (citation omitted). “A genuine issue of material fact exists when the record, giving the
benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable
minds might differ.” Bahri v IDS Prop Cas Ins Co, 308 Mich. App. 420, 423; 864 NW2d 609
(2014) (citation and quotation marks omitted).
It is well settled that a no-fault insurer is entitled to rescind ab inito an insurance policy
on the basis that the insured made a material misrepresentation in his or her application for no
fault insurance. 21st Century Premier Ins Co v Zufelt, 315 Mich. App. 437, 446; 889 NW2d 759
(2016). “Rescission is justified without regard to the intentional nature of the misrepresentation,
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as long as it is relied upon by the insurer. Reliance may exist when the misrepresentation relates
to the insurer’s guidelines for determining eligibility for coverage.” Id., quoting Lake States Ins
Co v Wilson, 231 Mich. App. 327, 331; 586 NW2d 113 (1998). However, an insurer must assert
any claim for rescission within six years after the claims accrue. MCL 600.5813. A claim for
rescission accrues when the wrong, in this case fraud or misrepresentation, is done, regardless of
when the damage results. MCL 600.5827.
The issue here boils down to when defendant’s rescission claim accrued. Plaintiff argues
that the claim accrued on September 6, 2006, when Mr. Maurer first submitted an application for
no-fault insurance, and therefore, defendant’s counterclaim for rescission was untimely, as it was
filed after September 6, 2012. Conversely, defendant argues that its rescission claim arose on
September 6, 2012, when Mr. Maurer renewed the insurance policy, and therefore could be
brought any time before September 6, 2018.
This Court has previously determined that a renewal contract is “a new or separate
contract.” 21st Century Premier Ins Co, 315 Mich. App. at 444. Accordingly, when Mr. Maurer
renewed his no-fault policy with defendant September 6, 2012, he effectively entered into a new,
separate, and distinct contract. In obtaining that contract, Mr. Maurer made the following
representations regarding the use of vehicles covered under the policy:
1. PRIVATE PASSENGER PICKUP DRIVEN TO WORK TO SCHOOL 5
DAYS PER WEEK A DISTANCE OF OVER 3 MILES BUT LESS THAN 15
MILES ONE WAY BY A 54 YEAR OLD MALE
2. PRIVATE PASSENGER CAR DRIVEN TO WORK OR SCHOOL 5 DAYS
PER WEEK A DISTANCE OF 3 MILES OR LESS ONE WAY BY A 52 YEAR
OLD FEMALE
3. PRIVATE PASSENGER CAR USED FOR PLEASURE DRIVEN BY A 54
YEAR OLD MALE
4. PRIVATE PASSENGER CAR DRIVEN TO WORK OR SCHOOL 5 DAYS
PER WEEK A DISTANCE OF 3 MILES OR LESS ONE WAY BY A 17 YEAR
OLD FEMALE
The policy identified Mr. Maurer’s and plaintiff’s daughter as the principal and/or occasional
driver of the Buick Century. Clearly, however, the Buick Century was driven by plaintiff, not
her daughter, and was not simply a “private passenger car.” Indeed, it is undisputed that at the
time of the accident, plaintiff drove the Buick Century for business purposes.
Further, Mr. Maurer agreed to contact his agent if the “covered autos are not used as
indicated above[.]” The policy contained an anti-fraud provision, that provided that defendant
would not,
cover any person seeking coverage under this policy who has intentionally
concealed or misrepresented any material fact, made fraudulent statements, or
engaged in any fraudulent conduct with respect to the procurement of this policy
or to any accident or loss for which coverage is sought.
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Put simply, the new contract entered into by Mr. Maurer on September 6, 2012 provided that
defendant would be entitled to rescind Mr. Maurer’s no-fault policy if Maurer made any material
misrepresentations in order to procure no-fault coverage. Accordingly, the misrepresentation
with respect the contract in effect at the time plaintiff was injured occurred on September 6, 2012
when the contract was entered into and took effect. Subject to any equitable defenses, defendant
had until September 6, 2018 to bring a claim for rescission. MCL 600.5813. Therefore, I would
conclude that defendant’s counterclaim for rescission was timely filed on January 5, 2015, and
that the trial court committed error requiring reversal by finding otherwise.
Further, I note that in my view, the majority’s conclusion that defendant’s rescission
claim accrued in 2006, and therefore is now time-barred, not only ignores the precedent
previously set by this Court, that a renewal contract is “a new or separate contract,” but it sets a
terrible new precedent. 21st Century Premier Ins Co, 315 Mich. App. at 444. In effect, the
majority has given carte blanche to plaintiff, Mr. Maurer, or anyone else who makes material
misrepresentations in the application for no-fault insurance. Moving forward, the majority has
made it so that as long as an individual can avoid an accident for six years, they may make
whatever fraudulent claims they please in order to obtain insurance, and still receive PIP
benefits. I cannot support such a conclusion.
III. MCL 500.3113(B)
Second, defendant argues the trial court abused its discretion by denying its motion to
amend its affirmative defenses to include that plaintiff’s claim was barred by MCL 500.3113(b),
and likewise, the trial court erroneously denied its motion for summary disposition. The basis of
defendant’s argument is that although plaintiff was the titleholder of the Buick Century, she was
not the named insured on the no-fault policy: Mr. Maurer was, and Mr. Maurer does not qualify
as an owner for purposes of the no-fault act. Accordingly, she is not entitled to recover from
defendant because she was driving an uninsured motor vehicle at the time of the accident.
Again, I agree.
This Court reviews a trial court’s decision to grant or deny a motion to amend affirmative
defenses for an abuse of discretion. Weymers v Khera, 454 Mich. 639, 654; 563 NW2d 647
(1997). Leave to amend “shall be freely given when justice so requires.” MCR 2.118(A)(2).
Amendment is generally a matter of right. In re Kostin Estate, 278 Mich App.47, 51, 748 NW2d
583 (2008). Leave to amend should be denied only for “particularized reasons,” i.e., undue
delay, bad faith or dilatory motive, repeated failures to cure by amendments previously allowed,
undue prejudice to the opposing party, or futility. Id.; Ostroth v Warren Regency, GP, LLC, 263
Mich. App. 1, 5, 687 NW2d 309 (2004). As noted supra, this Court reviews a trial court’s
determination on a motion for summary disposition de novo. Lowrey, 500 Mich. at 5-6.
No-fault insurers are required to pay PIP benefits for accidental bodily injuries to the
named insured, the named insured’s spouse, and a “relative or either domiciled in the same
household, if the injury arise from a motor vehicle accident.” MCL 500.3114(1). Defendant,
through the deposition testimony of Pete Buhl, admitted as much when he testified that as Mr.
Maurer’s spouse, plaintiff was “pulled in . . . essentially [as] a named insured.” Accordingly, if
plaintiff had been driver a vehicle owned or titled to Mr. Maurer at the time of the accident, she
would have been covered by the policy.
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However, an individual is excluded from receiving PIP benefits if at the time of the
accident, that person “was the owner or registrant of a motor vehicle . . . involved in the accident
with respect to which the security required by [MCL 500.3101] . . . was not in effect.” MCL
500.3113(b). Although Mr. Maurer obtained no-fault insurance for the Buick Century, the
vehicle involved in the accident, he testified in his deposition that he was not the registrant:
plaintiff was. The sole title holder of the Buick Century was plaintiff. In fact, the policy states,
in no uncertain terms, “IF THE COVERED AUTOS ARE NOT TITLED TO THE NAMED
INSURED IDENTIFIED ABOVE CONTACT YOUR AGENT.” Accordingly, the relevant
inquiry becomes whether Mr. Maurer was an owner for purposes of the no-fault act.
MCL 500.3101(2)(k)(i) defines an “owner” as “[a] person renting a motor vehicle or
having the use of a motor vehicle, under a lease or otherwise, for a period that is greater than 30
days.” There may be multiple owners of a motor vehicle, Ardt v Titan Ins Co, 233 Mich. App.
685, 691; 593 NW2d 215 (1999), and “it is not necessary that a person actually have used the
vehicle for a thirty-day period before a finding may be made that the person is the owner.
Rather, the focus must be on the nature of the person’s right to use the vehicle.” Twichel v MIC
Gen Ins Corp, 469 Mich. 524, 530; 676 NW2d 616 (2004).
In my view, the record is clear that Mr. Maurer does not qualify as an owner for purposes
of the no-fault act. During his deposition, Mr. Maurer testified that the Buick Century was titled
only to plaintiff and that the only person to ever drive the Buick Century besides plaintiff was
their daughter, whose usage was characterized as occasional. Accordingly, I would conclude
that plaintiff is barred from recovering PIP benefits from defendant because the Buick Century
lacked the necessary security. MCL 500.3113(b).
Based on the foregoing, I would conclude that the trial court abused its discretion by
refusing to allow defendant to amend its affirmative defenses to include MCL 500.3113(b).
Additionally, the foregoing analysis makes it clear regardless of the outcome of defendant’s
counterclaim for rescission, plaintiff’s recovery is barred, and summary disposition in favor of
defendant is appropriate.
IV. ALTERNATIVE GROUNDS FOR AFFIRMANCE
Finally, plaintiff argues as alternative grounds for affirmance that even if the statute of
limitations does not bar defendant’s counterclaim for rescission, several other equitable defenses
do. Specifically, plaintiff points to the doctrine of laches, the innocent third-party doctrine, and
the fact that where the insurance contract contains a remedy provision, rescission is unavailable
in light of an adequate remedy at law.
The three issues raised by plaintiff as alternate grounds for affirmance were either not
raised in the trial court, or were purposefully not addressed by the trial court. Accordingly, these
issues are unpreserved. Mouzon v Achievable Visions, 308 Mich. App. 415, 419; 864 NW2d 606
(2014). However, because “the issue[s] . . . concern[ ] a legal question and all of the facts
necessary for [their] resolution are present,” Dell v Citizens Ins Co of America, 312 Mich. App.
734, 751 n 40; 880 NW2d 280 (2015), this Court has the authority to address them. Although
“an appellee may argue alternative grounds for affirmance without filing a cross-appeal if the
appellee does not seek a more favorable decision,” Hanton v Hantz Fin Servs, Inc, 306 Mich
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App 654, 669; 858 NW2d 481 (2014), I would not conclude that any of plaintiff’s alternative
grounds for affirmance are persuasive.
First, plaintiff’s laches argument fails. A party seeking an equitable remedy must first
offer to do equity, and since laches is an equitable doctrine, the party with unclean hands may
not assert the defense. Atty Gen v Powerpick Players Club of Michigan, LLC, 287 Mich. App. 13,
52; 783 NW2d 515 (2010). When determining whether a party entered equity with unclean
hands, the relevant inquiry is whether the party seeking the remedy sought to mislead the other.
Isbell v Brighton Schools, 199 Mich. App. 188, 190; 500 NW2d 748 (1994).
Even assuming MCL 500.3113(b) does not bar plaintiff’s claim, based on the evidence
placed before the trial court by both parties, reasonable minds could not differ on the fact that
plaintiff cannot establish clean hands due to the material misrepresentations made by Mr. Maurer
in obtaining the insurance policy. Therefore, laches is unavailable as a defense to defendant’s
rescission claim. At his deposition, Mr. Maurer testified that he was aware that the insurance
policy did not accurately reflect plaintiff’s use of the Buick Century, however, on the advice of
his insurance agent, Mr. Maurer did not correct the misrepresentation. Rather, Mr. Maurer
testified that upon his agent’s suggestion, “when we cross that bridge, we’ll worry about it then.”
Further, the policy itself states that Mr. Maurer and plaintiff’s daughter was the sole driver of the
Buick Century, when in fact Mr. Maurer clearly testified that the Buick Century was titled to
plaintiff, and was only used by plaintiff as “her mail car.”
Additionally, even if plaintiff came to equity with clean hands, defendant pleaded
rescission as an affirmative defense on February 21, 2014, in response to plaintiff’s original
complaint. At this point plaintiff had not yet prevailed in her tort action, and therefore, any
recovery was speculative at best. Although defendant did not file its counterclaim for rescission
until 2015, it put plaintiff on notice of its intent to rescind the contract through its affirmative
defenses, and by returning to Mr. Maurer the insurance premiums he paid via check. Plaintiff is
therefore unable to establish any unreasonable delay on behalf of defendant. See Twp of Yankee
Springs v Fox, 264 Mich. App. 604, 611; 692 NW2d 728 (2004), where this Court previously
determined that for the doctrine of laches to apply, there must be an unreasonable delay that
results in “circumstances that would render inequitable any grant of relief to the dilatory
plaintiff.”
Second, plaintiff argued that this Court incorrectly decided Bazzi I, and that plaintiff is
entitled to the protection of the innocent third-party doctrine. Since this case was argued, our
Supreme Court decided Bazzi, and held that its decision in Titan Insurance Co v Hyten, 491
Mich. 547; 817 NW2d 562 (2012), “abrogated the innocent-third-party rule[.]” Bazzi v Sentinel
Insurance Co., ___ Mich ___, ___; ___ NW2d ___ (2018) (Bazzi II) (Docket No. 154442); slip
op at 14. Our Supreme Court went on to conclude that although an insurer is entitled to seek
rescission of an insurance contract based on fraud in the application for insurance, the insurer is
not automatically entitled to rescission by operation of law. Bazzi II, ___ Mich at ___; slip op at
17-18. Rather, when a third party is involved, the trial court must balance the equities to
determine whether the third party is “entitled to the relief he or she seeks.” Id. at ___; slip op at
16 (citation and quotation marks omitted.) However, in this case, plaintiff does not qualify as a
third party, and therefore, Bazzi II is inapplicable. As discussed, plaintiff was the owner of the
Buick Century, MCL 500.3101(2)(k)(i), but failed to obtain the necessary security required by
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the no-fault statute. Accordingly, plaintiff is barred from recovering PIP benefits. MCL
500.3113(b). Remand under Bazzi II is therefore not required.
Finally, plaintiff argues that because the insurance contract at issue contains a remedy
provision, equitable rescission is unavailable in light of an adequate remedy at law. However, in
light of the fact that MCL 500.3113(b) bars plaintiff’s recovery, the insurance contract at issue is
inapplicable to plaintiff, and this argument is without merit.
I would reverse and remand for the trial court to vacate its October 12, 2016 order and
grant summary disposition in favor of defendant.
/s/ Kathleen Jansen
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